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Sri Lanka’s crisis seen as highlighting lessons from Greece

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‘In some of the key metrics, such as debt/GDP, fiscal and current account deficit, you can see a lot of similarities between the crisis in Greece and that in Sri Lanka, which also has a lot to do with the actual incidents of the crisis, including accumulating of early warning signals and the failure to see the signals, rising deficits and debt to around 10% of GDP and triple deficits in 2009, in the case of Greece, former Finance Minister of Greece, Dr. George Papaconstantinou said at a Sri Lanka Institute of Directors (SLID)-initiated webinar recently.

‘The deeper causes behind the crisis was a combination of clientelism, a dysfunctional political system and weak institutions that could not act as a counterbalance to check political decision-making, Dr. Papaconstantinou added.

A SLID press release said: ‘The Sri Lanka Institute of Directors recently held a webinar titled Sri Lanka’s Economic Crisis: Lessons from Greece, featuring Dr George Papaconstantinou, the former Finance Minister of Greece. The session drew several pertinent lessons from Greece’s own experience through its tumultuous period of unprecedented economic crisis in 2009-2018 and its road to recovery. The session was moderated by Faizal Salieh, chairman of SLID. It had a 30-minute keynote speech by Dr Papaconstantinou followed by a 30-minute Q & A discussion.

‘Dr Papaconstantinou in his keynote said; “No two crises are the same. but there are many similarities such as warning signals, incidents, and unfortunately the same long and painful recovery periods.” He spoke about the key learnings from the Greek experience, critical actions that are required from a political and economic sense, the roles of business, government, and citizens in trying to find right solutions, short term quick fixes vs long term sustainability, and gave some broad recommendations that can be considered as Sri Lanka moves forward.

‘Greece had three bail outs, by far the biggest in any country. Unsustainable debt levels, excessive public expenditure, massive tax evasion, huge credit expansion and wages outstripping productivity gains contributed to the decline in the economy’s competitiveness.

‘He said that the Greek crisis was longer than it should have been due to mistakes that were made which need to be avoided in Sri Lanka, and that it is important to focus on the logic of the IMF bailout which is to provide funds until Sri Lanka regains access to international financial markets. In order to continue getting these funds, a combination of fiscal consolidation, monetary and exchange rate policies, and reforms in product, labour, and financial markets must be implemented which can be extremely unpleasant. He pointed out that fiscal consolidation would lead to recession but would eventually restore investor confidence and enable the return of long-term investors. He stressed the importance of long-term investors over the short-term opportunity-seekers for the economy’s long-term sustainability.’

‘Dr. Papaconstantinou cautioned that the country risk immediately spilled over to the corporate sector and had stayed over a long period in Greece, and they had a hard time tapping into international markets and had to grapple with issues such as acute forex shortages, and flight of highly skilled human capital that was essential for rebuilding the economy. He said the Greek economy was still carrying the cost of lost human talent.

“A lesson that we learnt was that one should not delay taking painful decisions, which is important for politics as well, because the longer it waits the tougher it becomes.” He stressed the need to move fast on the restructuring of debt. “Delay entails costs and typically, time is not in your favour. There is also a trade-off between short and long-term transformation with IMF asking for a lot of short-term measures which makes it harder to have long-term reforms. It is important to push for long-term transformation and growth potential of the country. In the private sector, when the bubble bursts there will be many losses and very few wins,” he added. “The crisis inevitably entails political polarisation, and even good companies can go bust. That’s where the Government should step in and support them.”

‘Speaking of the role of the citizens, business, and government, he said “Crises are transformative, dramatic and tend to completely upend a society, politics and business and often go through the 5 stages of grief – denial, anger, bargaining (Sri Lanka’s current stage), depression, and acceptance. Crises consume governments. It is important to keep the political climate non-toxic helping to keep the crisis duration shorter as in Portugal and Ireland and elites must also take the pain. If they are sheltered it is going to prolong the crisis. Social partners need to be part of the solution and should have a seat at the table even with IMF discussions on what needs to be done, and often IMF also gets it wrong as their recipes are not necessarily useful for every country.”

“The pain which accompanies every crisis needs to be apportioned in a socially fair manner. Everyone will suffer but the vulnerable will suffer more. If it is seen that business and political elites were carving out a secure environment, it will backfire. The government needs to be fully accountable with maximum publicity, honesty, and openness. Greece passed a law where every government expense is published on the web, if it is not, then it is not legal. Also, a realistic fiscal path needs to be determined, if not it could lead to a vicious circle and lead to economic collapse which happened in Greece. Embrace the necessary reforms whether they are public sector, product/market reforms, opening up markets, professions or reforming SOEs, and privatisation. It is important for the government to stand firmly behind these rather than as an afterthought to fiscal consolidation. Finally, it is important to get the narrative right, and recognize the reasons how you got to this situation, and who is accountable. In Greece, we blamed the IMF, the Germans for being too tough, and blamed everyone else except for ourselves, the government and the business community for making some wrong decisions like relying too much on the government and not standing on its own feet,” he concluded.

‘In response to a question from the moderator that the usual criticism levelled against IMF was that it has a “one-size-fits-all” prescription for remedy and how it was managed in Greece, Dr George explained that the IMF is now different from the Asian crisis times, “it is a different beast, they do actively try to be more understanding of the social situation and they are open to keeping a recipe of measures that is balanced and protects the vulnerable, and they are open as long as you got the data to back it up, and arguments to exchange some measures for others if you can show them that a specific measure is detrimental. At the end of the day, they have the money and therefore the veto rights, so it’s a delicate situation and they have to be convinced of your sincerity and competence. The conversation with the IMF does not finish with the signing of the agreement.”



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HSBC appoints new Country Head of Wholesale Banking for Sri Lanka and Maldives

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HSBC Sri Lanka has appointed Kevin Green as the new Country Head of Wholesale Banking for Sri Lanka and Maldives with effect from 1 November 2022.Kevin has been with the HSBC Group for over 24 years and has held several senior positions in commercial banking, retail banking and risk management.

Prior to taking on his new role, Kevin was the Country Head of Wholesale Banking in HSBC Bangladesh, and prior to that he was the Chief Risk Officer for HSBC Vietnam.Kevin will lead the bank’s Wholesale Banking business in Sri Lanka and the Maldives, supporting corporate banking clients. He will lead a dynamic team of professionals to provide tailored solutions and services to customers and ensure the continued growth of the business.

Kevin holds a Bachelor’s Degree in Mathematics from the University of Warwick and a Bachelor’s Degree in Financial Services from the University of Manchester. He is also an Associate of the Chartered Institute of Bankers.

Commenting on the appointment, Mark Surgenor, Chief Executive Officer for HSBC Sri Lanka and Maldives, said “As the leading international bank in Sri Lanka and with a presence in 63 markets globally, we want to open up a world of opportunity for our internationally minded clients. Therefore, I am pleased to bring in an experienced leader like Kevin to lead our Wholesale Banking operations in Sri Lanka and the Maldives. This is further evidence of our commitment to invest in the country and to support our clients. I am confident that Kevin’s extensive experience with HSBC Group will be an advantage to both our clients and colleagues, and further support the banks efforts towards economic growth of the country.”

HSBC, as the leading international bank has enjoyed a longstanding presence in Sri Lanka having completed 130 years of operations this year. The bank will continue to support Sri Lankan clients to connect globally and will continue to play a key role in supporting local businesses looking to expand across international markets by leveraging its global footprint and expertise in international trade, global payment services, sustainable finance and other financial services, whilst supporting its people and communities.

HSBC was recognised with the Sri Lanka International Initiative of the Year, won by Wholesale Banking for the dynamism, uniqueness, effectiveness & impact in green financing, for its first corporate ‘Green Loan’ for USD 6.3mn to Eco Spindles that was awarded by Asian Banking & Finance, this year. The bank was also named Best International Bank in Sri Lanka by Asiamoney, International Retail Bank of the Year by Asian Banking and Finance and Best Consumer Digital Bank in Sri Lanka by Global Finance for 2022.

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Sri Lanka Red Cross Society launches ‘Elixir’ to match donation in aid of medical requirements

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The Sri Lanka Red Cross Society launched Sri Lanka’s first-ever medical-supply-to-donation matching platform on October 19, 2022, called the Elixir Platform. The initiative is a volunteer-run, private-public-private partnership under the aegis of the Sri Lanka Red Cross Society, and allows hospitals and treatment centres from across Sri Lanka to register their requirements for lifesaving medicines and medical supplies that may be in short supply, due to the country’s ongoing economic and foreign exchange crises. ‘Elixir’ also provides a single streamlined interface for donors who would like to support Sri Lanka at this time. By having all requirements and donations coming in via a unified and seamless platform, ‘Elixir’ can then match requirements and donations for efficient use of funds and time, while also reducing the total turnaround time for assistance and increasing transparency.

Designed and operated by the Sri Lanka Red Cross Society, together with its global network of volunteers and professionals, and in partnership with the Sri Lanka Medical Supplies Division of the Ministry of Health, the Elixir Platform is a huge collaborative undertaking to help Sri Lanka overcome the shortage of lifesaving medicines due to the present economic crisis.

Discussing the initiative, Dr Mahesh Gunasekara, Director General of the Sri Lanka Red Cross Society said, “First, we must express our sincere gratitude to all the donors, including individuals, corporations and governments, who have come to Sri Lanka’s aid at this time of need. With a large number of donations, we found that it was becoming challenging to track and fulfil medical needs across the system and prioritize based on urgency. Other challenges including oversupply due to duplicative efforts, high costs due to not utilizing economies of scale, internal competition for donations and other issues have arisen, along with a lack of transparency. Thus, ‘Elixir’ is our answer to these problems, and will facilitate transparency and accountability throughout the entire supply chain for the benefit of all stakeholders. On behalf of the Sri Lanka Red Cross Society, I take this opportunity to thank all volunteers and partners in this endeavour. Elixir is truly a landmark achievement and we look forward to supporting Sri Lanka as it overcomes its present challenges.”

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Seylan World Mastercard cardholder offers

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Marking its most recent effort to reward its loyal customers, Seylan Cards recently announced the launch of an exclusive promotion for the benefit of all Seylan World Mastercard cardholders.

One lucky Seylan World Mastercard cardholder will receive an Omega timepiece worth over Rs. 2 million at the end of the promotion period. Founded in 1848, Omega is a Swiss watch brand synonymous with excellence, innovation and precision. Given that the brand’s history has been dedicated to a quest for perfection, such a prize is expected to appeal to the elite Seylan World Mastercard cardholders. In order to stand a chance to win, cardholders must spend a cumulative total of Rs. 1 million during the promotion period until the 15th of December 2022.

As the festive season approaches, Seylan Cards has aptly timed this promotion in an effort to reward cardholders as they complete their Christmas shopping lists. Since both local and international spends are valid for the draw, cardholders travelling overseas could purchase their air tickets and shop overseas to benefit from current exchange rates.

Cardholders are also encouraged to utilise their Seylan World Mastercard card for high value spends on items such as jewellery or even solar power installations to reach the Rs. 1 million threshold to enter the draw.

As Seylan World Mastercard cards are limited to an exclusive number of members, the chances of winning the luxury timepiece are much higher, and is a unique opportunity that should not be missed.As the essential card for essential needs, several merchants offer Seylan Cardholders special discounts and easy payment facilities with 0% interest. Anyone interested in obtaining a Seylan Card is encouraged to call the hotline on 011 2008 888.

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